STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2012

STOCKHOLDERS' EQUITY

13. STOCKHOLDERS’ EQUITY

Issuance of Class A Common Shares—During the year ended December 31, 2010, 3,000,000 shares of Class A common stock were newly issued by Lazard Ltd to Lazard Group in connection with the settlement of vested restricted stock unit grants denominated in shares of Class A common stock (“RSUs”). Such shares were authorized as part of the 25,000,000 shares of Class A common stock that may be issued under the Lazard Ltd 2005 Equity Incentive Plan (the “2005 Plan”). In addition, during the years ended December 31, 2011 and 2010, the Company issued an aggregate of 2,434,561 and 888,605 shares of Class A common stock, respectively, and during the year ended December 31, 2011, delivered 3,515,362 shares from Class A common stock held by its subsidiaries in connection with the LAM Merger (as described in Note 12 of Notes to Consolidated Financial Statements) and certain prior year business acquisitions.

Secondary Offerings—Pursuant to the applicable Prospectus Supplements during 2010, certain selling shareholders of Lazard Ltd (which included current and former managing directors of Lazard (and, from time to time, certain of our directors, executive officers or former executive officers) and their permitted transferees (collectively, the “Selling Shareholders”), who held LAZ-MD Holdings exchangeable interests and/or Class A common stock) offered to sell shares of Class A common stock pursuant to applicable underwriting and pricing agreements. Secondary offerings during the year ended December 31, 2010 are described below (no such secondary offerings occurred during the years ended December 31, 2012 and 2011).

In March 2010, certain Selling Shareholders sold 7,869,311 shares of Class A common stock (including (i) 7,262 shares of Class A common stock previously received upon the exchange of a like number of LAZ-MD Holdings exchangeable interests, (ii) 6,180,639 shares of Class A common stock received upon a simultaneous exchange of a like number of LAZ-MD Holdings exchangeable interests (including 5,958,000 shares held by the Estate of Lazard’s former Chairman and Chief Executive Officer and related trusts (collectively, the “Estate”) and (iii) 1,681,410 shares held by the Estate) at a price of $35.90 per share (collectively, the “March 2010 Secondary Offering”).

In August 2010, certain Selling Shareholders (the “August 2010 Selling Shareholders”) sold 7,397,837 shares of Class A common stock at a price of $30.32 per share (the “August 2010 Secondary Offering”). Separately, in connection with the August 2010 Secondary Offering, Lazard Group agreed to purchase from the August 2010 Selling Shareholders 2,500,000 shares of Class A common stock for an aggregate cost of $75,800 ($30.32 per share), with such purchase being part of the share repurchase program in effect during 2010. In the aggregate, the August 2010 Selling Shareholders sold a total of 9,897,837 shares of Class A common stock (including 7,194,144 shares of Class A common stock previously received upon the exchange of a like number of LAZ-MD Holdings exchangeable interests and 2,703,693 shares of Class A common stock received upon a simultaneous exchange of a like number of LAZ-MD Holdings exchangeable interests).

In November 2010, certain Selling Shareholders (the “November 2010 Selling Shareholders”) sold 3,000,000 shares of Class A common stock at a price of $35.77 per share (the “November 2010 Secondary Offering”, and together with the March 2010 Secondary Offering and the August 2010 Secondary Offering, the “2010 Secondary Offerings”). Separately, in connection with the November 2010 Secondary Offering, Lazard Group agreed to purchase from the November 2010 Selling Shareholders 1,220,714 shares of Class A common stock for an aggregate cost of $43,665 ($35.77 per share), with such purchase being part of the share repurchase program in effect during 2010. In the aggregate, the November 2010 Selling Shareholders sold a total of 4,220,714 shares of Class A common stock (including 1,543,245 shares of Class A common stock previously received upon the exchange of a like number of LAZ-MD Holdings exchangeable interests and 2,677,469 shares of Class A common stock received upon a simultaneous exchange of a like number of LAZ-MD Holdings exchangeable interests).

Lazard Ltd did not receive any net proceeds from the sales of Class A common stock from the 2010 Secondary Offerings.

Lazard Group Distributions—As previously described, Lazard Group’s common membership interests are held by subsidiaries of Lazard Ltd and by LAZ-MD Holdings. Pursuant to provisions of the Operating Agreement, Lazard Group distributions in respect of its common membership interests are allocated to the holders of such interests on a pro rata basis. Such distributions represent amounts necessary to fund (i) any dividends Lazard Ltd may declare on its Class A common stock and (ii) tax distributions in respect of income taxes that Lazard Ltd’s subsidiaries and the members of LAZ-MD Holdings incur as a result of holding Lazard Group common membership interests.

During the years ended December 31, 2012, 2011 and 2010, Lazard Group distributed the following amounts to LAZ-MD Holdings and the subsidiaries of Lazard Ltd:

	Year Ended December 31,
	2012		2011		2010
Tax distributions:
LAZ-MD Holdings	$	–	$	699	$	9,480
Subsidiaries of Lazard Ltd		–		16,800		52,135
	$	–	$	17,499	$	61,615
Other distributions:
LAZ-MD Holdings	$	5,170	$	4,383	$	9,804
Subsidiaries of Lazard Ltd		135,108		70,572		50,581
	$	140,278	$	74,955	$	60,385

Pursuant to Lazard Group’s Operating Agreement, Lazard Group allocates and distributes to its members a substantial portion of its distributable profits in installments, as soon as practicable after the end of each fiscal year. Such installment distributions usually begin in February.

Exchange of Lazard Group Common Membership Interests—In addition to the simultaneous exchanges that occurred in connection with the 2010 Secondary Offerings discussed above, during the years ended December 31, 2012, 2011 and 2010, Lazard Ltd issued 5,207,112, 876,614 and 12,081,618 shares of Class A common stock, respectively, in connection with the exchange of a like number of Lazard Group common membership interests (received from members of LAZ-MD Holdings in exchange for a like number of LAZ-MD Holdings exchangeable interests).

See “Noncontrolling Interests” below for additional information regarding Lazard Ltd’s and LAZ-MD Holdings’ ownership interests in Lazard Group.

Share Repurchase Program—In February 2011, October 2011, April 2012 and October 2012 the Board of Directors of Lazard Ltd authorized, on a cumulative basis, the repurchase of up to $250,000, $125,000, $125,000 and $200,000, respectively, in aggregate cost of Class A common stock and Lazard Group common membership interests through December 31, 2012, December 31, 2013, December 31, 2013 and December 31, 2014, respectively. The Company’s prior share repurchase authorizations expired on December 31, 2009 and December 31, 2011. The Company expects that the share repurchase program, with respect to the Class A common stock, will continue to be used, among other ways, to offset a portion of the shares that have been or will be issued under the 2005 Plan and the Lazard Ltd 2008 Incentive Compensation Plan (the “2008 Plan”). Pursuant to such authorizations, purchases have been made in the open market or through privately negotiated transactions, and since inception of the program in February 2006 through December 31, 2012, purchases with respect to such program are set forth in the table below (including, during the year ended December 31, 2012, purchases of 12,817,196 Class A common shares, at an aggregate cost of $354,464 (no Lazard Group common membership interests were purchased during the year):

	Number  of Shares/Common Membership Interests Purchased		Average Price  Per Share/Common Membership Interest
Class A common stock		35,726,044	$	31.04
Lazard Group common membership interests		1,400,089	$	32.66

As a result of the delivery of shares of Class A common stock through December 31, 2012 relating to (i) the settlement of vested RSUs and deferred stock unit grants (“DSUs”), (ii) the incentive plan share awards of shares of restricted Class A common stock, (iii) the delivery of shares of restricted Class A common stock in exchange for RSUs and (iv) the delivery of shares of Class A common stock in connection with business acquisitions and the LAM Merger, there were 12,802,938 and 3,492,017 shares of Class A common stock held by our subsidiaries at December 31, 2012 and 2011, respectively. Such Class A common shares are reported, at cost, as “Class A common stock held by subsidiaries” on the accompanying consolidated statements of financial condition.

As of December 31, 2012, after giving effect to the forward purchase agreement as described below, $154,066 of the current share repurchase amount authorized as of such date remained available under the share repurchase program, all of which expires December 31, 2014. In addition, under the terms of the 2005 Plan and the 2008 Plan, upon the vesting of RSUs and delivery of restricted Class A common stock, shares of Class A common stock may be withheld by the Company to cover its minimum statutory tax withholding requirements (see Note 14 of Notes to Consolidated Financial Statements).

During the year ended December 31, 2012, the Company had in place trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, pursuant to which it effected stock repurchases through the open market.

Preferred Stock—Lazard Ltd has 15,000,000 authorized shares of preferred stock, par value $0.01 per share, inclusive of its Series A and Series B preferred stock. Series A and Series B preferred shares were issued in connection with certain prior year business acquisitions and are each non-participating securities convertible into Class A common stock, and have no voting or dividend rights. During the years ended December 31, 2011 and 2010, 14,100 and 4,862 shares of Series A preferred stock, respectively, were converted into shares of Class A common stock, resulting in the issuance of 2,434,561 and 572,988 shares of Class A common stock in the respective years. As of both December 31, 2012 and 2011, 7,921 shares of Series A preferred stock were outstanding, and no shares of Series B preferred stock were outstanding. At December 31, 2012, no shares of Series A preferred stock were convertible into shares of Class A common stock on a contingent or a non-contingent basis.

Accumulated Other Comprehensive Income (Loss), Net of Tax—The components of AOCI at December 31, 2012 and 2011 are as follows:

	December 31,
	2012			2011
Currency translation adjustments	$	19,405		$	3,719
Interest rate hedge		(2,502	)		(3,557	)
Employee benefit plans		(128,536	)		(92,637	)
Total AOCI		(111,633	)		(92,475	)
Amount attributable to noncontrolling interests		(1,092	)		(4,111	)
Total Lazard Ltd AOCI	$	(110,541	)	$	(88,364	)

Noncontrolling Interests—Noncontrolling interests principally represent interests held in (i) Lazard Group by LAZ-MD Holdings and (ii) Edgewater’s management vehicles that the Company is deemed to control, but does not own.

As of December 31, 2012 and 2011, LAZ-MD Holdings held approximately 1.2% and 5.2%, respectively, of the outstanding Lazard Group common membership interests. Subject to certain limitations, LAZ-MD Holdings’ interests in Lazard Group are exchangeable for Class A common stock.

The following tables summarize the changes in ownership interests in Lazard Group held by Lazard Ltd and LAZ-MD Holdings during the years ended December 31, 2012, 2011 and 2010:

	Lazard Ltd					LAZ-MD Holdings						Total Lazard Group Common Membership Interests
	Common Membership Interests		% Ownership			Common Membership Interests			% Ownership
Balance, January 1, 2010		92,165,912		74.5	%		31,520,426			25.5	%		123,686,338
Activity January 1, 2010 to December 31, 2010:
Common membership interest activity in connection with:
Equity compensation		3,000,000					–						3,000,000
2010 Secondary Offerings		11,561,801					(11,561,801	)					–
Exchanges for Class A common stock		12,081,618					(12,081,618	)					–
Business acquisitions		888,605					–						888,605
Repurchase of common membership interests from LAZ-MD Holdings		–					(224,382	)					(224,382	)
Balance, December 31, 2010		119,697,936		94.0	%		7,652,625			6.0	%		127,350,561
Activity January 1, 2011 to December 31, 2011:
Common membership interest activity in connection with:
Exchanges for Class A common stock		876,814					(876,814	)					–
Business acquisitions		2,434,561					–						2,434,561
Repurchase of common membership interests from LAZ-MD Holdings		–					(19,032	)					(19,032	)
Balance, December 31, 2011		123,009,311		94.8	%		6,756,779			5.2	%		129,766,090
Activity January 1, 2012 to December 31, 2012:
Common membership interest activity in connection with:
Exchanges for Class A common stock		5,207,112					(5,207,112	)					–
Balance, December 31, 2012		128,216,423		98.8	%		1,549,667			1.2	%		129,766,090

The change in Lazard Ltd’s ownership in Lazard Group in the years ended December 31, 2012, 2011 and 2010 did not materially impact Lazard Ltd’s stockholders’ equity.

The tables below summarize net income (loss) attributable to noncontrolling interests for the years ended December 31, 2012, 2011 and 2010 and noncontrolling interests as of December 31, 2012 and 2011 in the Company’s consolidated financial statements:

	Net Income (Loss) Attributable to Noncontrolling Interests Year Ended December 31,
	2012			2011			2010
LAZ-MD Holdings	$	5,114		$	11,964		$	12,564
Edgewater		3,491			4,130			6,690
Other		(129	)		(452	)		190
Total	$	8,476		$	15,642		$	19,444

	Noncontrolling Interests As Of December 31,
	2012		2011
LAZ-MD Holdings	$	5,405	$	31,954
Edgewater		75,262		91,713
Other		1,217		17,046
Total	$	81,884	$	140,713

Dividend Declared, December 2012—On December 11, 2012 the Board of Directors of Lazard Ltd (i) declared a special dividend of $0.20 per share on its Class A common stock, payable on December 27, 2012, to stockholders of record on December 21, 2012 and (ii) accelerated the payment and record dates of Lazard’s fourth quarter dividend of $0.20 per share on its Class A common stock, which ordinarily would have been payable in February 2013. The accelerated dividend was also payable on December 27, 2012, to stockholders of record on December 21, 2012.